> ## Documentation Index > Fetch the complete documentation index at: https://mso.getlemma.com/llms.txt > Use this file to discover all available pages before exploring further. # Set up payroll (two employers, one team feeling) > The PC employs clinicians, the MSO employs everyone else — two EINs, multi-state registration, PEOs, benefits parity, and contractor misclassification risk. An MSO-PC group has **two employers**. The PC employs clinicians; the MSO employs everyone else. That means two payrolls, two sets of employer registrations per state, and a benefits design that makes one team out of two payrolls. ## Prerequisites * Both entities formed with EINs * Employer registrations in every state with employees, **for both entities** * A clear list of who is employed by which entity ## Who employs whom | Role | Employer | Why | | ------------------------------------------------------------- | ----------------------------- | --------------------------------------------------------------------------------- | | Physicians, NPs, PAs, therapists, dentists, anyone practicing | **PC** | In CPOM states, only the PC may employ clinicians to practice | | Medical assistants, clinical support | **Usually PC**, sometimes MSO | Depends on state rules about clinical staff; take it to counsel | | Front desk, scheduling | MSO | Non-clinical | | Billers, coders | MSO | Non-clinical, but coding **responsibility** stays with the PC | | Practice managers, administrators | MSO | Non-clinical | | Marketing, finance, HR, IT | MSO | Non-clinical | | Executives | MSO | And they cannot be PC officers where the state restricts those roles to licensees | **The clinical support staff question is genuinely state-dependent.** Medical assistants working under clinical supervision look clinical; in some analyses they are MSO-employable, in others not. Get a state-specific answer rather than defaulting either way. See [What an MSO can and can't do](/concepts/model/what-msos-can-and-cant-do). ## Steps Per state, per entity: * Income tax withholding registration * Unemployment insurance registration * Any local or municipal taxes * Workers' compensation coverage **Both** entities, wherever each has employees. Missing one produces penalties that accrue quietly. | Option | Notes | | -------------------------------------- | --------------------------------------------------------------------- | | **One provider, two company accounts** | Most common. One vendor relationship, two EINs, two funding accounts. | | Two separate providers | Rarely worth the added administration | | **PEO for one or both entities** | See below | **Test the two-employer case in the demo.** Many payroll products assume one business with one EIN. Ask directly: can I run two employers under one login, with separate funding accounts and separate tax filings? A product requiring two entirely separate instances is workable but is not the integration it was sold as. See [Bundled payroll and processing](/concepts/banking/bundled-payroll-and-processing). Clinical payroll from the **PC's** account. Non-clinical from the **MSO's**. This is not a bookkeeping preference. Paying clinical payroll from the MSO's account means the MSO is compensating clinicians for practicing, which is the CPOM prohibition. Two employers, one team. If the PC's clinicians and the MSO's staff sit in the same office with materially different benefits, you have a morale problem and a recruiting problem. Aim for the same health plan design, the same PTO policy, and the same retirement plan structure across both. Note that offering identical plans across two unrelated employers has its own compliance considerations — **controlled group and affiliated service group rules** can affect retirement plan testing and ACA obligations. This is a real question for your benefits advisor, not a formality. Each new state means registrations for both entities, state-specific withholding, state unemployment insurance, and any state-mandated programs — paid leave, disability, retirement mandates. Remote employees create nexus in their state of residence. Track where people actually work, not where they were hired. **Misclassifying clinicians as independent contractors is a common and expensive error.** A clinician who works set hours, at your location, using your equipment, under your policies, seeing your patients, is generally an employee regardless of what the agreement says. Exposure includes back employment taxes, penalties, benefits claims, and state wage-and-hour liability. Classification tests differ between the IRS, the Department of Labor, and each state, and several states apply notably strict tests. Some clinicians are genuinely contractors — true locums, occasional coverage, clinicians with independent practices. Most staff clinicians are not. Take it to employment counsel. Note also that a contractor clinician still must be **credentialed and linked** to the PC's payer contracts to bill for their services. ## PEOs A **professional employer organization** becomes a co-employer, handling payroll, benefits, and compliance. | For | Against | | -------------------------------------- | ------------------------------------------------------ | | Better benefits pricing at small scale | Cost, typically a percentage of payroll | | Multi-state registration handled | Less control | | Compliance support | Exiting is disruptive | | Reduced administrative load | **The co-employment relationship needs CPOM analysis** | **A PEO co-employing your clinicians deserves specific analysis.** In a CPOM state, the question of whether a lay co-employer employing physicians to practice creates exposure is not obvious. Some groups use a PEO for the MSO only and keep the PC's payroll direct. Raise it with healthcare counsel before signing. ## Verify it worked * [ ] Both entities registered as employers in every state where each has employees * [ ] Clinicians employed by the **PC** * [ ] Non-clinical staff employed by the **MSO** * [ ] Clinical support staff classification confirmed with counsel * [ ] Clinical payroll funded from the PC's account; non-clinical from the MSO's * [ ] Payroll provider handles two employers without separate instances * [ ] Benefits designed for parity, with controlled-group implications reviewed * [ ] Contractor classifications reviewed by employment counsel * [ ] Multi-state registrations current as you expand ## Common failure modes | Failure | Consequence | | ----------------------------------------------- | -------------------------------------- | | MSO employing clinicians | Direct CPOM violation | | Clinical payroll paid from the MSO's account | Same problem, via the money flow | | Only one entity registered in a state | Payroll tax penalties | | Payroll product that can't handle two EINs | Duplicate administration | | Divergent benefits between entities | Morale and recruiting problems | | Clinicians misclassified as contractors | Back taxes, penalties, benefits claims | | PEO co-employing clinicians without CPOM review | Unanalyzed exposure | | Remote employees creating unregistered nexus | Penalties | ## Related topics - [Register entities in additional states](/guides/formation/register-foreign-entities.md) - [Draft clinician employment agreements](/guides/agreements/draft-clinician-employment-agreements.md) - [Set up bookkeeping and consolidation](/guides/banking/set-up-bookkeeping.md) - [What an MSO can and can't do](/concepts/model/what-msos-can-and-cant-do.md) - [When platforms bundle payroll and card processing](/concepts/banking/bundled-payroll-and-processing.md) - [Per-entity account & access checklist](/reference/banking/per-entity-account-checklist.md)